Fears of a resurgence of the coronavirus have held back the UK’s economic recovery, the Royal Bank of Scotland said, with the Scottish private sector growing at the slowest pace in nearly a year.
While business activity in Scotland rose in December, the rise was the smallest since growth returned 10 months ago, according to the bank’s latest business activity index.
Malcom Buchanan, Chairman of the Scotland Board of the Royal Bank of Scotland, said: “The Scottish private sector has experienced the weakest growth in 10 months as Omicron concerns weigh on customer demand and supply issues continuing to hamper businesses, especially in the manufacturing sector. “
The bank said its seasonally adjusted index – a measure of the combined output of the manufacturing and services sector – was 52.7 in December, down sharply from 55.9 in November.
A number less than 50 represents an overall decrease, while a number greater than 50 represents growth.
Services grew at a slower pace in December, while factory output fell for the first time since last September, according to the Royal Bank of Scotland analysis.
Mr Buchanan added: “Inflationary pressures also remained severe in December, although the latest data indicated a slight easing of pressure as finance charges and average charges increased at slightly reduced rates.
“Nonetheless, businesses remained optimistic about activity over the next 12 months, with Scottish businesses expecting Covid-19 issues to ease and demand to improve as dawn breaks. from 2022. “
Sebastian Burnside, the bank’s chief economist, said: ‘The resurgence of the pandemic in December slowed the UK’s economic recovery, with every nation and region feeling the pinch as people changed their behavior in response to the increase in cases.
“But despite the similarities to previous waves, levels of business activity appear to have been more resilient this time around, in part due to comparatively lighter restrictions.”
For the ninth time in as many months, Scottish businesses recorded an increase in employment in December and the bank’s analysis said the latest increase could be in efforts to ease pressures on capacity and step up operations looking forward to stronger sales in the coming months.
Mr Burnside said the labor market was a ‘bright spot’ across the UK in December, but the rate of job creation was the slowest since April and that in Scotland the resumption of labor Employment has been much slower than the UK-wide average.
“Although in many cases the pace of job creation has slowed, employment growth rates have generally remained strong by historical norms, supported by continued optimism about the growth outlook in 2022” , did he declare.
The analysis showed that Scottish companies had also increased their tariffs in December, with companies citing rising costs for fuel, transport, personnel and equipment as well as shortages, Brexit and Covid-19 as drivers of inflation.